The government has stated that it has not introduced or imposed new taxes in the 2010 budget statement. It said contrary to media speculations, the government sought to improve the efficiency of the existing tax regime through “a shift from specific to ad-valorem excise taxes on existing selected commodities and the restoration of import duty on food imports, especially rice, wheat, maize, vegetable oil, among others.”

A release signed by the Media Liason at the Ministry of Finance and Economic Planning, Mr Abdul Hakim Ahmed, said, “it is important to note that both the specific and the ad-valorem taxes are designed to be revenue same amount of revenue if used efficiently.”

It mentioned that duties before their removal in 2008 were: Wheat, 10 per cent; rice 20 per cent; vegetable oil, 20 per cent, and maize, 20 per cent. The release said the government had identified several challenges with the use of specific rate on commodities such as tobacco products, beer and spirit and noted that “these challenges have often led to massive loss of revenue to the government due to the difficulty in interpreting a proper index for the specific rate, with concomitant negative effects on government’s revenue and the efficiency and fairness of the tax system.”

“It is for this reason that government has decided to move to ad-valorem rates,” it added. It further explained that the ad-valorem rates that were to apply to the said goods in the 2010 fiscal year were not new but had been in the Customs, Excise and Preventive Service (CEPS) books since 1984/86 before the change in 2007.

“In fact, the main objective of the shift from specific to ad-valorem is to maintain the tax rate that existed in the country prior to the introduction of the specific in 2007,” the release said, and mentioned that the Harmonised Commodity Codes and the Tariff Schedule of 2004 of CEPS contained the entire rates that had been mentioned in the 2010 budget.

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